Mutual Funds Vs FD: Mutual Funds puts money from investors in a mix of assets, like stocks, bonds, and securities, managed professionally. A Fixed Deposit (FD) is a savings option where you park your money with a bank or financial institution for a set period, earning a fixed interest rate.
Here’s a comparison between the mutual funds and fixed deposits:
| Category | Mutual Funds | Fixed Deposits (FD) |
|---|---|---|
| Returns | Higher, inflation-beating returns linked to market performance. | Guaranteed returns fixed for the entire tenure, unaffected by market performance. |
| Management | Managed by professional fund managers. | Not actively managed; interest rate is fixed at the time of deposit. |
| Risk | Varies across different securities; returns subject to market risks. | Comparatively, low risk; returns are guaranteed, and principal amount is safe. |
| Liquidity | High liquidity; easy to invest and redeem. Flexible options. | Moderate liquidity with flexible tenures (7 days to 10 years). |
| Investment Options | Various types of funds (equity, debt, hybrid, etc.). | Various FD options available (Standard, Tax Savings, Special, Corporate, Regular, Senior Citizen). |
| Suitability | Suitable for investors looking for potentially higher returns and willing to take on some market risk. | Ideal for risk-averse investors seeking guaranteed returns and safety of principal. |
| Tax Benefits | ELSS funds offer tax benefits under Section 80C; other funds may attract capital gains tax. | Tax benefits under Section 80C; senior citizens may also benefit from exemptions under Section 80TTB. |
| Accessibility | Easily invest through various platforms. | Available at all banks and financial institutions with guaranteed returns and maturity amount. |
Mutual Funds Vs FD: Which Is Better?
Both mutual funds and fixed deposits have their advantages and disadvantages. FDs offer stable returns and secure investment opportunity, while mutual funds offer potentially higher returns over time and diversify your investments. However, choice is based on your financial goals and risk comfort. For best results, consider combining both in your investment portfolio.
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